Gas Prices and Exploration

Abstract

Over the last year or so there has been a great deal of comment about the prices paid for North Sea gas by the British Gas Corporation. A number of commentators have suggested that the reserve potential of the North Sea is very large but the low prices offered by British Gas have destroyed the incentive to explore. As a result, they claim that exploration has fallen to fairly low levels and the high reserve potential has not been reflected in the discoveries made. This paper examines the position on exploration and reserves to show that this view of matters can be very misleading and that exploration levels have been influenced by a range of factors, some of which may be more important than price.